Why I Am Fixated on Cost & Competitiveness

Maybe I'm fixated on cost and competitiveness, but over Christmas, two things happened that drove me to ponder these themes. The first is that I was given a Boxee Box as a gift; the second is a technology, entertainment, and design (TED) lecture that I heard via Boxee by an incredible 19-year-old woman named Eva Vertes.

The Boxee Box is neither a new nor unique product as there are similar offerings in the marketplace. It brings content to your TV using the Internet in a simple and effective way. Boxee isn't revolutionary; it is just a low cost, convenient alternative to cable or satellite TV. However, like a flu virus identified a few years back, it can wreak havoc on traditional content companies.

The value proposition of the traditional content providers is under attack from this technology alternative. Thanks to Boxee, my $100/month cable bill can be replaced by a little more Internet bandwidth and Netflix. If I wanted to have slightly less convenience, I could just use my PC. This approach is roughly five times cheaper for the same (or possibly better) service. Cable and satellite companies must respond with differentiated business models, alternate business endeavors, or lower costs. As the value of their services drop (five times in my case) so will price. The rapid fall of long distance phone service consumer prices is a parallel example.

My fixation on cost dictates that a company must be the low-cost producer in the market space in which they compete. When heavy competition hits or alternative products appear, companies don't have time to begin cost cutting; they must already be cost effective. They must know that they are! They mustn't believe their own marketing hype; they must know for a fact based on real data that they can win the street fight when they have to. Fact-based knowledge is available through independent, third-party benchmarking like that from Lytica's Freebenchmarking.com and Component Cost Estimator products.

Eva Vertes brought my mind to organizational culture, although her talk had nothing to do with that subject. This remarkable young woman started working on the effects of heavy metal contamination on the nervous system at age 14, moved on to Alzheimer's research and then, at 19 (in 2005), she embarked on cancer research based on insights that most of the cut/chemo/radiate crowd seem to have missed (see: Eva Vertes looks to the future of medicine).

Why should this woman be so creative and productive while working at the edge of the established system? The question contains the answer. She was in the process of learning and getting an education rather than being engrained in the profession and its practices. The idea of being outside the system, tolerating a fringe, and allowing things that are different is at the heart of what has made America great.

While companies have organizational cultures, it is the people, or rather the behavior of people within the system, that determines what the culture is. Most behaviors driven by company culture are based on what they think made them successful in the past. This may be different from what actually made them successful and those behaviors they need to adopt in the future (or today).

I am not in the habit of quoting Einstein, but it appears that he agrees with me:

Anyone who has never made a mistake has never tried anything new.

The only thing that interferes with my learning is my education.

And a commonly used one:

Insanity: doing the same thing over and over again and expecting different results.

While organizational culture is a powerful force in enabling results, it can also prevent results. Cultures are based on beliefs and rituals that cause things to be done over and over again the same way. If over and over again is practice, it aids proficiency. If it's a common approach to all problems, it's risky, or as Einstein says, "insanity."

Your example with Apple is a good one. Apple moved in with significant brand and perfoirmance differentiation and everyone else had to scramble. Most weren't ready.

On the Boxee topic, it works very well. My DSL internet service that is about 5 years old gives excelent performence with the standard Boxee content offering. When I go to other content providers through Boxee the service suffers depending upon the providers server performance.

@t.alex: yes there are exceptions to all rules; but in general they are not exceptions but just a scale-deimnsion difference. apple is now reaching the point (as evidenced by the significant drop in stock price in recent months) where the novelty of the initial (and subsequent) iPhones is beginning to wear out, and competition is getting there.

another point to keep in mind: what is price for one is cost for the next. the cost of an iphone is the aggregate of the prices paid by apple for the various parts and services (incl OH), the price is what apple charges me. my cost of the iphone ......

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